Nifty 50 equal-weight index surges past Nifty 50 due to market rally

Published: February 13, 2021 at 4:59 pm

The market rally over the last few months has seen the Nifty 50 equal weight TR index (N50 EW)surge past the Nifty 50 (N50) TR index. The N50EW one-year return minus the N50 one-year return has reached a level last seen four years ago.

Readers may recall our Dec 2019 that the return difference of Nifty 50 vs Nifty 50 Equal-weight index at an all-time high! This was clear evidence that Nifty (or Sensex) returns were propelled only by a few stocks. Just three months later the market crash destroyed the two-year imbalance among Index stocks.

In the Sensex or Nifty 50 or NIfty 100, just the top few stocks make up the bulk of the portfolio.

Nifty 50 equal-weight TRI one-year return minus Nifty 50 TRI one-year return (yellow) plotted along with the Nifty 50 TRI
Nifty 50 equal-weight TRI one-year return minus Nifty 50 TRI one-year return (yellow) plotted along with the Nifty 50 TRI

This should help active fund managers and can already be seen in the trail one-year large cap fund returns. A year or two ago this list was dominated by index funds (hence their current popularity). Today, the top ten is dominated by active large cap funds and low AUm index funds. We had pointed this out before: After the market crash, 80% of active large cap funds outperform Nifty, Nifty 100.

The situation in the bottom part of the NIfty 50 has also improved but not as much as the top half.


Nifty 100 equal-weight TRI one-year return minus Nifty 100 TRI one-year return (yellow) plotted along with the Nifty 100 TRI
Nifty 100 equal-weight TRI one-year return minus Nifty 100 TRI one-year return (yellow) plotted along with the Nifty 100 TRI

How big a disparity between the top few stocks of the NSE and the rest can be better seen from the 2Y and 3Y return differences.

2Y return difference

Nifty 50 equal-weight TRI two-year return minus Nifty 50 TRI two-year return (yellow) plotted along with the Nifty 50 TRI
Nifty 50 equal-weight TRI two-year return minus Nifty 50 TRI two-year return (yellow) plotted along with the Nifty 50 TRI
Nifty 100 equal-weight TRI two-year return minus Nifty 100 TRI two-year return (yellow) plotted along with the Nifty 100 TRI
Nifty 100 equal-weight TRI two-year return minus Nifty 100 TRI two-year return (yellow) plotted along with the Nifty 100 TRI

3Y return difference

Nifty 100 equal-weight TRI three-year return minus Nifty 100 TRI three-year return (yellow) plotted along with the Nifty 100 TRI
Nifty 100 equal-weight TRI three-year return minus Nifty 100 TRI three-year return (yellow) plotted along with the Nifty 100 TRI
Nifty 50 equal-weight TRI three-year return minus Nifty 50 TRI three-year return (yellow) plotted along with the Nifty 50 TRI
Nifty 50 equal-weight TRI three-year return minus Nifty 50 TRI three-year return (yellow) plotted along with the Nifty 50 TRI

The stocks at the bottom of Nifty 50 or Nifty 100 have quite a bit of catching up to do with respect to 2Y and 3Y returns. So “the market” is not really overvalued from this point of view. It will be interesting to see how active fund managers fare from here on. It is also possible that the imbalance might return!

In this review dated Oct 2019 – Is it time to exit ICICI Value Discovery & Quantum Long Term Equity? – I had pointed out that those who appreciate a value strategy must stick with these funds. Those who did must have benefited from their recent resurgence.

Do share if you found this useful

Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 640 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2525 investors and advisors are part of our exclusive Facebook Group! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 585 salaried employees, entrepreneurs and financial advisors are part of our exclusive Facebook Group! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps